Question

Omaha’s factory has yet another type of cost structure. It’s cost function is provided graphically. It’s maximum capacity is 38,000 units per day. At what rate is the cost per unit decreasing for production levels above 12,000?(Graph is included in picture)

Answer 1

Solution:

Given the graph;

The rate, r, at which the cost per unit decreasing for production levels above 12,000 is;

$\begin{gathered} (12000,0.85),(38000,0.59) \\ \\ r=\frac{|0.59-0.85|}{38000-12000} \\ \\ r=0.00001 \end{gathered}$

ANSWER: 0.00001